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Analysts provide insight on Covestro, DuPont

The futures of materials firms Covestro and DuPont have drawn commentary from market analysts.

Analyst Philipp Stuelken of financial website Seeking Alpha is bullish on Covestro, which in July rejected a buyout bid of more than $12 billion from Abu Dhabi National Oil Co. (ADNOC).

“Even though these rumors have a high influence on the share price, I also see a compelling investment case regarding the fundamentals, which started improving,” he wrote in a recent research note. “This strengthens hope that the down-cycle has seen its low and starts recovering.”

Stuelken added that, overall, improving metrics “indicate the beginning of a new business cycle despite the challenging macro-environment in Germany.”

“Market expectations remain very cautious, still creating a good investment case for [Covestro] even if the takeover plans of ADNOC fail. …I remain bullish for 2024 and 2025 and see substantial upside.”

Covestro is based in Leverkusen, Germany, and has U.S. headquarters in Pittsburgh. The company is a global supplier of polycarbonate resins and films, thermoplastic polyurethane, PU materials and foams, and other specialty chemicals and materials. The firm employs almost 18,000 and posted sales of $19.6 billion in its 2022 fiscal year.

Covestro’s per-share stock price began the year around 38 euros ($41) but was just above 49 euros ($53) in early trading Sept. 1, an increase of almost 30 percent.

Regarding DuPont, research firm MLT Analytics said in a research note that the firm’s recent sale of 80 percent of its Delrin-brand acetal resin business “will effectively mark DuPont’s exit from polymerization activities for commodity and engineering plastics.”

MLT officials pointed out that while DuPont invented nylon resin and was a major producer of other specialty plastics, the firm’s focus now “is clearly on value-added converted products” such as Tyvek film, Tedlar PVF sheet, Kevlar aramid fiber, Kapton polyimide electronic films, and Styrofoam extruded polystyrene (EPS) insulation sheet.

Private equity firm TJC LP bought an 80 percent acetal stake for $1.8 billion. The business has annual sales of about $550 million, employs about 600 and operates production sites in Parkersburg, W.Va., and Dodrecht, Netherlands.

The TJC deal wrapped up most of the sale of DuPont’s Mobility & Materials unit. In February, Dallas-based Celanese Corp. agreed to acquire a majority of that unit for $11 billion in cash. The M&M deal didn’t include Delrin to avoid regulatory issues, since Celanese already is the world’s largest supplier of that material.

Wilmington, Del.-based DuPont also recently wrapped up its $1.75 billion acquisition of Spectrum Plastics Group. The deal increased DuPont’s presence in downstream finished products. Spectrum is a major extruder of medical tubing and related products that posted 2022 sales of $450 million.

On Wall Street, DuPont’s per-share stock price began 2023 just under $69 but was near $77.40 in early trading Sept. 1 for an increase of more than 12 percent.

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